Gold price target lowered, but strategists still bullish

Bank of America Merrill Lynch analysts cut their price target for gold but are still bullish on the precious metal for the longer term

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The strategists expect the price of gold to reach $1,680 per ounce this year, compared with a forecast of $2,000 back in January, but are still bullish on precious metals.

In an asset allocation and positioning note released on Thursday, the Bank of America Merrill Lynch strategists said gold would likely reach $2,000 next year.

Gold has seen 12 years of rising prices, as investors have used it as a safe-haven to protect themselves against inflation and against the falls in the prices of other assets during the financial crisis.

But gold prices fell for five straight months, with the precious metal losing around 4% in February alone, as worries over the US economy recede and investors are slowly going back into stocks.

In other asset allocation strategies, the Bank of America analysts are now neutral on emerging market stocks and debt, from a bullish stance back in January, echoing other investors’ more cautious positions versus emerging markets.

A market sentiment survey carried out in February showed investors bearish on emerging markets for the first time since June.

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In emerging markets, the Bank of America strategists recommend buying Russian equities and, like in January, Latin American infrastructure and consumer-related stocks.

In foreign currency debt they recommend overweight positions in Indonesia, Turkey, Brazil and Venezuela while in local debt they prefer Colombia.

They remained bullish on North American stocks and kept their 1600 target for the S&P 500, looking for value in cyclical sectors.

They are also bullish on European stocks despite “some scope for near-term consolidation;” they favor cyclical and financial stocks.

The strategists are bullish Japanese stocks and bearish on the UK and the Pacific Rim.

They are also bearish on government, quasi-sovereign and investment grade debt.

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